BellSouth End-Around Fizzles

8/26/2005 8:00 PM Eastern

By: Linda Haugsted

Facing intense opposition from incumbent video providers and cities, a North Carolina state Senate committee has excised bill language that cable incumbents believe would have relieved BellSouth Corp. of all cable-franchising requirements.

The bill, on the table since February, is meant to correct technical errors, such as punctuation and numeric errors committed in other bills. But legislators also use it to dump unrelated items, such as declaring Seagrove, N.C., the birthplace of the state’s pottery industry.

Two weeks ago, the BellSouth-sponsored language surfaced, specifying that a public utility that provides video service is not a cable system.

CREDITS FOR CABLE

Clifton Metcalf, a BellSouth spokesman, said the language was appropriate for a corrections bill. This session, the legislature raised taxes on vendors, including direct-broadcast satellite and cable systems.

Cable systems actually received a smaller tax hike than DBS users, getting an offset of their state taxes as credit for the 5% they pay in local franchise fees.

Though BellSouth has not announced plans for video services in the state, the company sought language clarifying that it and 26 other incumbent utilities — including Verizon Communications Inc., electric providers and gas companies — are not subject to the video providers tax. Verizon will launch video service this year, but North Carolina is not one of the states where the company is currently planning to join the cable business, a spokesman said.

Bill language upset incumbent cable operators, especially because a bill designed to ease the migration of telephone companies into the video business was introduced at the beginning of the session – but was deemed too big an issue to address now. It was forwarded to committee for discussions in advance of the 2006 session.

The technical corrections bill language would have given BellSouth the option to get into cable later “clear of any and all regulation,” said Tom Adams, president of Time Warner Cable Raleigh and president of the state cable association.

Municipalities were also concerned about the loss of potential franchise fees, control over rights of way and loss of local programming. Lobbyists from the North Carolina League of Municipalities joined cable, criticizing the way the issue had been introduced.

OPPONENTS CAME OUT

Opponents flooded a meeting of the Senate’s Judiciary II committee. “Once it was understood by the Senate that this was much more than a technical correction, they dropped the language,” Adams said.

Metcalf said the real question for legislators should be how to stimulate competition in the video market place. “That’s something customers want,” he said.

The committee deleted the cable franchising language on Aug. 22. Both sides say they welcome discussion on new providers.

“We’re not opposed to competition, we just want a level playing field with equal standards for all players,” Adams said. “This is just the beginning of a long fight.”